Here is ExxonMobil (via Reuters):
An Exxon spokesman said in an e-mail on Sunday that the International Chamber of Commerce, or ICC, had ruled that Venezuela’s state oil company, PDVSA, “does have a contractual liability to Exxon Mobil. The ICC award is for $907,588,000.”
Here is a commenter on this website:
“Is very clear that Venezuela lost the arbitartion case: ExxonMobil vs PDVSA on the nationalization Exxon’s assest in Venezuela. The sum awarded is not of relevance for the general business community.”
It’s fine for Exxon lawyers to try and put a positive face on this result. Their jobs are on the line. But please, commenters and journalists, don’t fall for this BS.
The dispute was never whether Venezuela had an obligation to pay ExxonMobil. Venezuelan Oil Minister Rafael Ramírez has said many times that the Venezuelan government knew it had to pay for the assets. The dispute was always over the dollar amount. That is the only thing of “relevance to the general business community.”
Here is the fight: Venezuela said it would pay book value, which was less than $1 billion. ExxonMobil wanted net present value.
Another important element of this dispute, particularly for the oil and gas industry, is the crucial and ever-present question of market value vs book value.
And here is the (summary of the first) decision: Essentially book value plus interest. I haven’t seen the 400-page decision, to know how the panel came up with its figure, but that number is public, and regardless of how the panel came up with its figure, the number is what it is.
PDVSA won. And for those of you who
claim to* love Venezuela, you should be happy. This is a lot of money that will could have been redistributed from the people of Venezuela to the shareholders of ExxonMobil — who are doing fine, thanks. (Stock up 14% year over year, market cap above $400 billion, 13% operating margin.) Instead of seeing this as a lost opportunity to spank your bugbear Hugo Chavez, maybe thank your stars that he, and a possible next president of Venezuela just dodged a $6 billion legal bill.
(Anyway, another arbitration decision remains to be seen.)
* Updated Jan. 4 by deleting disparaging word. I know those guys love their country and I shouldn’t have had that word there.